Bond Market Update

Auction Reaction

• Recent action saw the 10-yr note and shorter tenors climb past their opening levels while the long bond has also seen some buying, but it remains just below its starting mark. The recent movement followed a few hours of sideways action with shorter tenors showing relative strength. However, the 10-yr note has narrowed some of its underperformance gap as the U.S. Treasury sold $42 bln in 10-yr notes to strong demand. The sale drew a high yield of 4.342%, which stopped through the when-issued yield by more than a basis point while the bid-to-cover ratio (2.60x vs 2.55x average) and indirect takedown (71.2% vs 69.3% average) were above average. The U.S. Treasury will cap this week's note and bond auction slate with a $25 bln 30-yr bond reopening on Thursday.
• Yield Check:
  • 2-yr: -5 bps to 3.79%
  • 3-yr: -6 bps to 3.76%
  • 5-yr: -4 bps to 3.90%
  • 10-yr: -2 bps to 4.32%
  • 30-yr: UNCH at 4.83%